The engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by the management for the improvement of their operations. Money is worth 10.118% annually. PLAN A: Plan A calls for an initial investment of P354,571 and will have a salvage value equivalent to 18.876% of the invested capital at the end of 19 years. The plan requires payments of P14,026 and P18,874 for years 5 and 9, respectively. The operation and maintenance disbursement are estimated to be P11,847 annually and annual taxes will be 2% of the initial investment. PLAN B: Plan B calls for an immediate investment of P216.985, a second investment of P268,775 on the 8th year, and a final investment of P130.145 on the 12th year. Plan B will last for 19 years as well. The operation and maintenance disbursements will be P15,214 annually. Using the Equivalent Uniform Annual Cost Analysis, determine the following: A.)Equivalent annual cost of Plan A. B.)Equivalent annual cost of Plan B. C.)Most economical plan. (Justify your answer in your solution.) Please provide detailed solution not in excel, I'm in rush I will 100% guarantee you to vote it up for your effort, thank you)
The engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by the management for the improvement of their operations. Money is worth 10.118% annually. PLAN A: Plan A calls for an initial investment of P354,571 and will have a salvage value equivalent to 18.876% of the invested capital at the end of 19 years. The plan requires payments of P14,026 and P18,874 for years 5 and 9, respectively. The operation and maintenance disbursement are estimated to be P11,847 annually and annual taxes will be 2% of the initial investment. PLAN B: Plan B calls for an immediate investment of P216.985, a second investment of P268,775 on the 8th year, and a final investment of P130.145 on the 12th year. Plan B will last for 19 years as well. The operation and maintenance disbursements will be P15,214 annually. Using the Equivalent Uniform Annual Cost Analysis, determine the following: A.)Equivalent annual cost of Plan A. B.)Equivalent annual cost of Plan B. C.)Most economical plan. (Justify your answer in your solution.) Please provide detailed solution not in excel, I'm in rush I will 100% guarantee you to vote it up for your effort, thank you)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by the management for the improvement of their operations. Money is worth 10.118% annually.
PLAN A:
Plan A calls for an initial investment of P354,571 and will have a salvage value equivalent to 18.876% of the invested capital at the end of 19 years. The plan requires payments of P14,026 and P18,874 for years 5 and 9, respectively. The operation and maintenance disbursement are estimated to be P11,847 annually and annual taxes will be 2% of the initial investment.
PLAN B:
Plan B calls for an immediate investment of P216.985, a second investment of P268,775 on the 8th year, and a final investment of P130.145 on the 12th year. Plan B will last for 19 years as well. The operation and maintenance disbursements will be P15,214 annually.
Using the Equivalent Uniform Annual Cost Analysis, determine the following:
A.)Equivalent annual cost of Plan A.
B.)Equivalent annual cost of Plan B.
C.)Most economical plan. (Justify your answer in your solution.)
Please provide detailed solution not in excel, I'm in rush I will 100% guarantee you to vote it up for your effort, thank you)
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